S&l Violated Rules With Hold On Check

December 31, 1991|By BILL DOYLE, Investor`s Guide

Q. I recall you writing about a relatively new law prohibiting banks from putting long holds on deposited checks and limiting those holds to two days for local checks and five days for non-local checks.

I deposited a $12,915.62 check in my money market deposit account at a local savings and loan association. The check was drawn on a bank with headquarters in this state, which has local branches.

The teller put a hold of six business days on it. With weekends and a holiday added, that made the hold 11 days. When I protested, the branch manager said the law allows the bank to do this on deposits over $5,000.

How can this be correct?

A. That S&L fractured the rules laid down by the federal Expedited Funds Availability Act. The hold should have been on $7,915.62, making $5,000 of that check available to you within two business days.

The regulation paring back holds to two business days for local checks and five business days for non-local checks has been in effect since Sept. 1, 1990. For two years prior to that, shortly after the law was passed, the maximum holds were three business days for local checks and seven business days for non-local checks.

Also, cash deposits, wire transfers and funds from U.S. Treasury checks and cashier`s checks must be made available the next business day.

However, there are exceptions to these rules, all aimed at protecting banks from rubber checks. Checks used to open new accounts can be put on hold for up to 30 calendar days.

When a local check is for more than $5,000, the excess amount can be put on hold, but $100 must be made available the next business day and $4,900 the second business day.

A local check is defined as one deposited in the same Federal Reserve check processing region as the bank on which the check was written. There are 48 such regions in this nation. The rules apply to all depository institutions.

Based on your statement that you deposited the $12,915.62 check in an account you had already established, that hold was way out of line. My suggestion is to go back to the S&L and insist that your account record be straightened out, so that interest is credited for the days it should have been but wasn`t.

If you get no cooperation, tell that branch manager you will file a complaint with the Office of Thrift Supervision, 1700 G Street, NW, Washington, D.C. 20552.

Q. My credit union recently changed its share and deposit insurance to the National Credit Union Share Insurance Fund, which is administered by the National Credit Union Administration, an independent agency of the federal government.

What are your comments on the security offered by this insurance? Does the federal government guarantee my deposits, as it does deposits in banks and S& Ls?

A. That insurance coverage -- NCUSIF, for short -- is excellent. The federal government guarantee is the same as Federal Deposit Insurance Corp. coverage -- FDIC`s Bank Insurance Fund on bank deposits and FDIC`s Savings Association Insurance Fund at S&Ls. Actually, NCUSIF is in better financial shape than FDIC.

The people running your CU did the wise thing by obtaining that federal insurance coverage. Some private and co-op deposit insurers have gone belly up in recent years. Many members of CUs in Rhode Island, for instance, are still waiting -- hoping might be a better word -- to get their money back.